If cost savings is not the primary driver, offshore outsourcing may be an option.
Posted Dec 20, 2004
The early experimenters with call-center global service delivery models, often called offshore outsourcin, were typically large financial services institutions that could allocate 500 or 1,000 seats to an outsourcer. Given greater than 50 percent differentials between internal and offshore hourly rates, generally, these initiatives easily paid off regardless of the initial setup and incremental network expenses. However, as global service delivery has grown in popularity, midsize organizations (100 to 300 seats) have become interested in pursuing this service alternative as well. But are they positioned to benefit from implementing global service delivery models as well as their larger counterparts?
Medium-size organizations sometimes have neither sufficient capital to invest nor comprehensive in-house expertise to build and operate all of the mainstream technologies required to operate a best practices contact center. These include standard systems such as quality observation systems, multichannel customer access, Web-based forecasting and scheduling systems and CTI-based intelligent screen pop. Medium-size centers are even less likely to have access to leading-edge systems, such as searchable knowledgebase systems, integrated CRM packages and advanced expertise-based routing.
Clearly, the reduction of simple labor rates will benefit mid-sized companies as much as larger ones. However, the relative impact of the one-time and continuing incremental costs of outsourcing usually fall more heavily on smaller companies. While service providers are willing to spread initial costs into their hourly fees, there can still be a substantial per-seat impact of set-up costs, such as initial training, stay-on bonuses for impacted staff, several months of parallel operations, possible continued lease expenses for abandoned space, severance, network reconfiguration, and CRM and CTI redesign and re-integration.
While many of these costs are variable and dependent on the number of seats involved, some, such as process analysis, initial technology implementation, etc, are fixed and will have a material impact on smaller projects. Generally, if enough agents are impacted, these fixed expenses are small in relation to the labor savings. However, if fewer than 150 seats are involved, these costs may extend the break-even point too far out to be acceptable.
So what is a medium-size call center to do? The answer may be that a smaller company must determine whether its primary reasons for outsourcing are financial or performance related. If financial, the company should perform a very careful cost projection to ensure that financial benefits can be obtained within an acceptable time frame.
If the benefits are to be performance-related, the company must identify specifically which performance areas it wishes to impact and identify the outsourcer's fees for implementing these systems. The benefit that outsourcers offer in this area is that they have already purchased, designed and deployed the required systems. This means that a company signing-on with an outsourcer has significantly less work to do to receive the same level of benefits. Utilizing a service provider allows a company with a smaller IT staff to obtain the benefits of the latest technologies so long as it can afford the incremental costs and set-up fees that the provider will charge.
In conclusion, if the key reason for a mid-sized company to outsource is performance or technology-related, outsourcing can be justified if the costs can break even during an acceptable time period. However, if a medium-size center is looking primarily for cost savings and does not need an injection of technology or management competency, the benefits of global service delivery must be carefully reviewed to ensure that they can be reached in a reasonable time.
About the Author
Hobart Harris, Ph.D., is a senior advisor at TPI, where he focuses on assessing the potential value of Outsourcing for TPI's clients. Dr. Harrisholds a Ph.D. in social and industrial psychology, and has worked with leading multinational banks, manufacturing companies and telcos, as well as with smaller service companies and technology firms.
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